1924 



May S. 1924 



The nKnoM Agricultural A»iocirtioo Record 



Pace S 



Mehl Tells of U.S. G. G. Problems in Resignation 



Chicago, Illinois, April 17, 1924. 

 To the Board of Directors, 



United States Grain Growers, Inc. 

 Gentlemen : 



"My resignation, effective April 14, was sub- 

 mitted to President Harrj- L. Keefe, under date 

 of March 28. I am accepting the U. S. Depart- 

 ment of Agriculture appointment as Grain Ex- 

 change Supervisor. My present purpose is to 

 inform you more fully of my reasons for taking 

 this step and to outline certain impressions I 

 have formed concerning your problems. The lat- 

 . ter will be of value mainly as coming from me at 



•■ a time when my strictly personal interest in these 



matters has ceased to exist and while certain ex- 

 perience and information are still fresh in my 

 memorj'. 



I need not remind j-oti of the situation exist- 

 ing in the U. S. Grain Growers, Inc., at the time 

 the present directors and officers were drafted to 

 the task of salvaging it. Two major problems 

 confronted us ; first, the one of treating with 

 creditors and restoring the organization finan- 

 cially ; second, the establishment of grain handling 

 facilities for its members. We were assured that 

 some promise of success in dealing' with these two 

 problems would be met with necessary new capital 

 and support by the Farm Bureau Federations of 

 the midwest states. 



Debentures Satisfied Most Creditors 

 On July 2-3, last, representatives of the Midwest 

 Farm Bureaus were presented with a program 

 which did show some promise of success in solving 

 the problems referred to. At least they took action 

 to appropriate $20,000 for the purpose of carrying 

 it into eflFeet, and the U. S. Grain Grower board 

 was instructed to proceed with the program pro- 

 posed. No part of the $20,000 was ever made 

 available, but the American Farm Bureau Fed- 

 eration, with considerable sacrifice to itself, under- 

 took to maintain our modest office. With this help 

 and about $1,000 received from the Illinois Agri- 

 cultural Association for printing and incidentals, 

 we proceeded as directed, confident that the appro- 

 priations voted by the Midwest Federations would 

 be forthcoming. I do not criticize nor find fault 

 with these federations, but on the contrarj' shall 

 attempt later herein to justify and explain why 

 the appropriations were not made. 



On October 1, there was mailed to U. S. Grain 

 Grower creditors a form of funding debenture 

 having the effect of full legal composition and re- 

 lieving the corporation from further obligation ex- 

 cept as to certain specified sources of future net in- 

 come. The response by creditors was overwhelm- 

 ingly one of acceptance. Out of the 800 creditors 

 less than a dozen objected and most of these for 

 reasons which are well known to you and which 

 had no relation to their interests as creditors. 

 Some personal contact work and a limited amount 

 of cash would have brought a 100 per cent ac- 

 ceptance. You will search in vain for a parallel 

 case in the entire history of industrial reorganiza- 

 tions, and for a case in which creditors and mem- 

 bers have shown greater patience and faith in 

 ultimate result. 



Board of Trade a Barrier 

 By December 1 our grain sales program was 

 sufliciently far advanced to enable our receiving 

 grain in the Chicago market. A few cars were 

 received during the month and handled to the 

 shippers' entire satisfaction, although the Chicago 

 market was not especially favorable at the time, 

 and we were not yet admitted to Board of Trade 

 representation. Storage and processing facilities 

 had been provided for our members to accommo- 

 date several million bushels, and a line of credit 

 procured of a million dollars. Storage was made 

 available to our members at practically one half 

 the regular rates, and we were able to actually 

 handle grain at Chicago in all positions and fur- 

 nish practically all of the service provided for in 

 members' contracts. Still waiting for the prom- 

 ised fimds to be made available, so that we might 

 re-establish contact with members and affiliated 

 elevators in the countrj-, we centered our efforts 

 on securing representation on the Chicago Board 

 of Trade under the provisions of the Grain Futures 

 Act. To this end and as furnishing the necessary 

 financial responsibility to safeguard our shippers 

 we filed with the Chicago Board of Trade a cor- 

 porate surety bond in the sum of $50,000, guaran- 

 teeing the integrity of our contracts, and in addi- 

 tion filed a financing contract whereby our credit 

 and financial resptfnsibility with respect to grain 

 transactions on the Board of Trade were further 



underwritten to the extent of a million dollars. 

 On this showing and failing to secure any satis- 

 factorj- answer from the Board of Trade w^e took 

 our case to the Secretarj- of Agriculture. 

 Small Point; Big Objectioii 



The Board of Trade, when pressed to ntake final 

 answer, took the position that since our creditors 

 had not all accepted the funding debentures the 

 corporation was deemed not to be in a solvent con- 

 dition, and therefore did not have "adequate fiuan- 

 cial responsibility" in the sense that this term is 

 used in the Grain Futures Act. This may have 

 been a purely technical objection, for the financing 

 arrangements and bond protectibn referred to" cov- 

 ered fully our responsibilit.v to shippers. Never- 

 theless, the point was properly raised and the 

 Board of Trade was well within its rights in pass- 

 ing the question to the Secretarj' of Agriculture 

 and to the courts, if neces.sar>', for adjudication. 



The Board of Trade having rested its rejection 

 of the U. S. Grain Growers, Inc., to membership 

 representation on the single objection that the 



About This Statement — 



J. M. Mehl, secretary and acting treasurer 

 of the United States Grain Growers, Inc., re- 

 signed from that position 

 recently and has taken a 

 position in the United 

 States Department of Agri- 

 culture as Grain Exchange 

 Supervisor. In his state- 

 ment of resignation present- 

 ed to the Board of Direc- 

 tors, he gives some pertinent 

 facts about the U. S, Grain 

 Growers which will n o 

 doubt interest you. His res- 

 ignation statement, which is reproduced on 

 this page, is a good analjrsis of the situation. 



J. M. Mehl 



corporation was technically insolvent, we forth- 

 with offered to qualify the U. S. Grain Growers 

 Sales company by the same means provided for 

 the parent organization and showed that the Sales 

 company was unquestionably solvent. 



Subsidiary's Recognition Sanctioned 

 The Sales company, as a pure subsidiarj-, had 

 all of the essential requirements for representation 

 that did the parent organization, and w'as free of 

 the one alleged objection to U. S. Grain Growers, 

 Inc. It did not, however, have any considerable 

 cash capital and the result of our negotiations 

 with the Board of Trade, assisted by the Grain 

 Futures Administration, was a proposal from the 

 Board that upon qualifying the Sales company, as 

 suggested, and upon a, further showing of $15,000 

 unimpaired capital, our representation would be 

 granted. We were ad^^sed, and I believe the Grain 

 Futures Administration was advised, that this 

 proposal had the approval formally of the board 

 of directors of the Chicago Board of Trade and 

 it was therefore finally and authoritatively sanc- 

 tioned. » 



Whether or not the Board of Trade could be 

 forced to accept our original application without 

 the $15,000 of proprietorship capital is not worth 

 while to discuss. The Board of "Trade made a pro- 

 posal which I consider eminently fair and for the 

 cooperatives' own best interests. We of course 

 must recognize that in the cooperatives the Board 

 of Trade sees a menace to the business of certain 

 of its members. It necessarily will look first to 

 protect those who are already members. I have 

 no patience with men who even in this situation 

 find reason for unjustly attacking the exchanges. 

 Board of Trade Protects Members 

 Cooperatives must and will rise above this kind 

 of thing if they seek permanent existence. I have 

 at times disagreed with some of you. I have never 

 hesitated to be candid with all of you, and to m.v 

 way of thinking, the organized grain exchanges 

 of this country, in their legitimate functions, must 

 for a long time yet continue to serve the purpose 

 of show windows wherein is displayed for sale- # 

 large part of our surplus grain crops, and where 

 buyer and seller may meet «nder business cus- 

 toms and trade regulations which insure greatest 

 facility and ease of business conduct. I consider 

 it no less "direct dealing" that a representative 

 of the farmers and a representative of the miller 

 or consumer meet and make their trades in a spe- 

 cial market place and exchange hall provided for 

 the purpose. '•■ ■ i , . i 



No Blame on Midwest Farm Bureaus 

 Reverting to the program appn)ved by ilie Mid- 

 west Farm Bureau Federations last Jul.v, 1 have 

 previously said I find no fault with them for fail- 

 ing to provide the agreed approprialions. A num- 

 ber of deterring factors have entered into this 

 situation and under the circumstance^ 1 hardly 

 See how they could ha.ve done differentfr. In the 

 first plade, it seems that the L". S. Grun Grower 

 plan of grain marketing, radical thoi^h it ap- 

 peared io the beginning, no longer offers quite the 

 lure and appeal that do other plans .featuring 

 more speeificall.v the idea of price eontrot .Sincere 

 friends of the V. S. Grain Growers have said that 

 farmers *ecentl.vhave been promised so many im- 

 possible benefits that they will no longer be satis- 

 fied with the legitimate fruits of cooperative or- 

 ganization and that it is hn inauspicious time for 

 effort along this line. While I do not slian- that 

 view there is more than a small measure of truth 

 in the suggestion and no doubt the Farm Bureaus 

 hare sensed something of the kind as affecting the 

 program t>f U. S. Grain Grower reconstruction. 



Hope in CooperatiTe Movement 

 There- is much in the cooperative movement as 

 a whole iipon which to build hope of a more pros- 

 perous and stable agriculture. "There is also much 

 in the means b.v which cooperative marketing is 

 being sold to farmers toda.v that startles and 

 alarms the cooperator of yesterday. He realizes 

 as well as any one, peAaps. that tfie cooperative 

 idea has never been put up in the attractive pack- 

 age that it deser\'ed. Yet, he can not but wonder 

 what reaction will follow the extravagant claims 

 of some of the more recent converts who have also 

 assumed tlhe role of "Medicine Man" to American 

 agricultune. It is quite certain that to the extent 

 members of cooperative organizations are led to 

 expect imjpossible results just to that extent will 

 they be disappointed and the cooperative move- 

 ment as a whole suffer relapse. I do not l)elieve 

 the present board of directors of the II. S. Grain 

 Growers, Inc., will ever have cause to regret- their 

 conseijvatitm and refusal to indulge in impossible 

 promises, but it is not improbable that they will 

 find it hard for a time yet to secure enthusiastic 

 support of just an ordinary' "hard boiled" bnsi- 

 ness program. 



The legitimate fruits of :COoperative jnarketing 

 should be jsuificient in theraBelves to co||mend the 

 system ani encourage its development, :No better 

 sj-stem of' marketing farm products cjmiever be 

 devised than one which gives the producers them- 

 selves control and direction over the-machiner>' of 

 dijtributioh. In this direction and control, how- 

 ever, is contained the whole meat and kernel of 

 cooperative marketing. Th^ maehinerj' of- distri- 

 bution in this countrj' has been built up in much 

 the same wta.v that units of pro<luction and special- 

 ized functions are introduced and fitted into fac- 

 tors- operation to meet expanding needs. It may 

 be necessaly at times to change engineers and to 

 replace factor}' superintendents with men of 

 greater \-iion and more modern ideas. It is sel- 

 dom necessarj' to wreck the factory or even stop 

 the machiiiery while the change is made. 



■janagerial Power Not Supreme \ -• 

 In the verj- nature of things there ape certain 

 matters qiiite beyond the control of managerial 

 power, whether that control b<» vested in private 

 hands or iti a body of producers. Therefore, we 

 cannot expject cooperative marketing to solve cer- 

 tain problems an.v more than they can be solved 

 by private enterprise. Cooperative marketing will 

 not of itself enabl? profitable production of a eom- 

 moditj" foi^ which there is not an absorbing de- 

 mand at tfce profitable price figure. There is no 

 known meains of either eliminating the "marginal 

 pr^ucer" !or of 'enabling the high cost producer 

 to compete! profitably in trade with the low cost 

 producer. In a relative sense tiiese two factors 

 are now and alwa.vs will be at tTie botlpom of agri- 

 caltural distress. For cooperative organizations 

 to promise ;more than the benefits growing in the 

 main' out Of better methods and standards, in- 

 ■ crea.sed volume, more orderly distribution and 

 elimination of excessive handling profits, is to flirt 

 with certai|i failure. T can conceive no more use- 

 ful work on the part of farm organizations at this 

 time than a carefuU.v planned campaign to#ducate 

 farmers geBerall.v to a true appreciation of the real 

 and legitimate benefits of cooperative effort, in 

 order that fihey ma.v not be disappointed in failing 

 to receive ^hat they never had a right to expect. 



,^^. (Signed^ .1. M. MEHL. 



